Genscape responds to EPA’s plan to revoke its QAP registration

Genscape has responded to a notice from the U.S. EPA indicating the agency may revoke the ability of Genscape to verify renewable identification numbers (RINs) under the renewable fuel standard (RFS) quality assurance program.

On Jan. 4, the EPA issued a notice of intent to revoke Genscape’s ability to verify RINs, announcing that it is taking action to hold Genscape accountable for failing to meet all elements of its approved quality assurance plan and for verifying millions of RINs that were fraudulently generated by two companies, Gen-X Energy Group Inc. and Southern Resources and Commodities. The agency also said it is requiring Genscape to retire valid RINs to replace the approximately 68 million invalid A-RINs they verified, which were then used for compliance. That action must be completed within 60 days.

In a statement issued Jan. 5, Genscape said through its prior work as a provider of quality assistance plan (QAP) services to Gen-X and SRAC, in late 2013, it identified certain inconsistencies in SRAC’s operations. Genscape said it proceeded to investigate those concerns, and subsequently issued a notice of potentially invalid RINs (PIR). As part of the PIR notice, Genscape said it turned over the results of its investigation to the EPA in April 2014 and continued to cooperate with EPA throughout this matter. Genscape also noted it assisted the U.S. Department of Justice “in a series of grand jury investigations that followed as the government ultimately unraveled the full scope of the sophisticated conspiracy perpetrated by the principles of Gen-X, SRAC and several other individuals and shell companies.”

“Genscape stands by its QAP service, which combines best practices of paper-based audits with real-time operational monitoring via remote, independent sensing,” said the company in a statement. “Genscape firmly believes that purely paper-based audits would have failed to detect the anomalies that formed the basis for its PIR notice of SRAC. The role Genscape played in detecting and exposing Gen-X and SRAC’s complex fraud operation reflects the unique advantages of Genscape’s QAP program with verification via remote operational sensing, client-provided information, and on-site interactions. The unraveling of a major, complex fraud scheme where QAP was in play demonstrates the success of the QAP program.”

In the statement, Genscape stressed it was taken aback by the EPA’s notice of intent to revoke its registration as a third-party auditor under the QAP program and require the company to replace all A-RINs generated through fraud perpetrated by Gen-X and SRAC. “Genscape believes it acted responsibly by investigating concerns identified through the implementation of its approved QAP plan, by turning over the results of that investigation to EPA, and by assisting the DOJ in its successful pursuit of a series of criminal convictions,” said the company. “Genscape disagrees strongly with EPA’s conclusion that Genscape failed to fully implement its approved QAP program. Genscape believes that holding the company fully accountable for the crimes committed by Gen-X and SRAC by requiring the replacement of nearly 68 million RINs would far exceed the magnitude of the conduct alleged in the notice, which Genscape disputes.”

According to Genscape, the company intends to defend its actions vigorously in its response to EPA’s notice.